In a significant development for India’s cryptocurrency landscape, the Gujarat International Finance Tec-City (GIFT City) is set to implement a comprehensive regulatory framework for cryptocurrency exchanges and tokenization activities by 2025, according to insider sources.
Background on GIFT City:
GIFT City, located in Gujarat, is India’s first operational smart city and International Financial Services Centre (IFSC). It was established to compete with global financial hubs like Singapore and Dubai, offering various tax incentives and a sophisticated financial services ecosystem.
Key Developments:
The International Financial Services Centres Authority (IFSCA) Asset Tokenisation Committee is expected to submit a detailed report in the coming year, which will form the foundation for these regulations. The framework will initially be limited to GIFT City but is expected to serve as a model for nationwide implementation.
Historical Context:
– In 2018, the RBI had initially banned banks from processing cryptocurrency transactions
– The Supreme Court overturned this ban in March 2020
– India introduced a 30% tax on crypto gains and a 1% TDS on crypto transactions in 2022
– The country has been participating in G20 discussions on creating a global crypto regulatory framework
Regulatory Approach:
– IFSCA will serve as the primary regulatory authority for crypto exchanges operating within GIFT City
– The framework will encompass both cryptocurrency trading and tokenization projects
– There are plans to potentially include tokenized assets and cryptocurrencies under the Securities Contracts (Regulation) Act’s definition of securities
– The approach aligns with global trends of creating regulated environments for crypto activities
Current Progress:
Several projects are already operational within the IFSCA’s regulatory sandbox, including initiatives focused on:
– Real estate tokenization
– Fund unit tokenization
– Bond tokenization
– Blockchain-based financial services
Broader Technology Focus:
The IFSCA’s approach extends beyond just cryptocurrencies, encompassing:
– Blockchain technology applications in finance
– Web3 applications and infrastructure
– Metaverse projects and digital asset frameworks
– Distributed ledger technology (DLT) implementations
International Perspective:
This move aligns with global trends where several countries have established regulatory frameworks for cryptocurrencies:
– Singapore’s Payment Services Act
– Dubai’s Virtual Assets Regulatory Authority (VARA)
– Japan’s regulatory framework under the Financial Services Agency
Market Impact:
The development of a clear regulatory framework could have several implications:
– Increased institutional investor participation
– Enhanced consumer protection measures
– Development of standardized practices for crypto businesses
– Potential for legitimate crypto businesses to operate with regulatory clarity
Industry Response:
The cryptocurrency industry has historically advocated for regulatory clarity in India. This framework could provide:
– Clear operational guidelines for exchanges
– Standard practices for customer protection
– KYC and anti-money laundering protocols
– Defined parameters for token listings and trading
Future Outlook:
The successful implementation of these regulations in GIFT City could:
– Serve as a template for national cryptocurrency regulations
– Attract international crypto businesses to India
– Foster innovation in blockchain and digital asset technologies
– Position India as a significant player in the global crypto ecosystem
[Note: Based on NDTV Profit’s exclusive report, December 18, 2024, supplemented with historical context through April 2024]
This expanded version provides more context about India’s crypto regulatory journey and places the development within the broader global context of crypto regulation. The additional details help readers understand the significance of this development and its potential implications for India’s financial technology sector.
